Economic Protection Essay

Topics: International trade, World Trade Organization, Trade bloc Pages: 3 (1094 words) Published: June 22, 2013
Protection restrains trade between nations through methods such as tariffs on imported goods, quotas, subsidies and local content rules. All of these are designed to give an advantage to domestic business and assist them in competing in a global market. Trading blocs involve 3 or more states forming a block which reduce barriers to trade with each other. An example of this is ASEAN (Association Of South East Asian Nations). Protection assists domestic businesses in competing against large well-established businesses. However protection tends to do result in foreign nations retaliating by establishing protectionist policies. This is one of the main arguments against protection. One of the reasons for protection is that it shelters domestic industry temporarily when it first begins, until it grows to large scale production then remove the protection. Governments provide protection for a number of reasons. One of which is infant industry protection. When new industries start off they are generally small and have high costs compared to established international industries. Therefore governments may choose to protect these infant industries until they have grown and are able to be competitive in an international market. However infant industry protection is only imposed temporarily until they have grown. However this promotes inefficiency and so the opportunity to remove the protection never emerges. Governments may also encourage protection in order to protect domestic employment. This is because it is thought that if we reduce protection then structural unemployment rises. Also if we raise protection, unemployment falls. We export our unemployment to other countries. However job losses in the short run are overcome by the release of resources to more efficient uses and productivity rises in the long run. Another reason for protection is to combat dumping. Dumping is when foreign firms sell goods in overseas markets at a price below production costs, in order to...
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